Working Papers

Local interests change sharply after the energy booms that began in 2003, when hydraulic fracturing spurred extraction of formerly uneconomic oil and gas reserves. Support for conservative interests rises and Republican political candidates gain votes after booms, leading to a near doubling in the probability of a change in incumbency. All of this change occurs at the expense of Democrats. Voting records of U.S. House members from boom districts become sharply more conservative across a wide range of issues, including issues unrelated to energy policy. At the level of the individual, marginal candidates skew their voting behavior somewhat toward more conservative causes, but generally not enough to maintain power. Thus, even when the stakes are high and politicians risk losing power, ...

Using exogenous deposit windfalls from oil and natural gas shale discoveries, we demonstrate that bank branch networks help integrate U.S. lending markets. We find that banks exposed to shale booms increase their mortgage lending in non-boom counties by 0.93% per 1% increase in deposits. This effect is present only in markets where banks have branches and is strongest for mortgages that are hard to securitize. Our findings suggest that contracting frictions limit the ability of arm's length finance to integrate credit markets fully. Branch networks continue to play an important role in financial integration, despite the development of securitization markets.